The journey of startups from inception to going public is a transformative process and requires careful attention to governance principles. CII Charter lately highlighted that startup governance is important for establishing a strong foundation and ensure long-term success.
Laying the groundwork is required at the inception stage and this includes forming a board of directors, setting a tone and implementing essential financial process. It is said that the initial steps are crucial for establishing a culture of responsibility and transparency within the organization.
Now, as the startups progresses, the next step is to meeting the demands of growth. Boards take on increased responsibilities and monitor key business metrics. They define decision-making processes and even establish committees such as audit and risk management. Internal control is important to support scaling of operations and managing emerging risks.
The third is the growth stage and governance takes on a strategic focus in it. Startups usually emphasize stakeholder engagement at this stage by communicating their vision, mission and values clearly. They strengthen a culture of ethics and integrity in the company. They implement policies and procedures to reflect the principles. Diversity, equity and inclusion (DE&I) are the priorities and should be reflected in board composition and organizational culture as well.
Governance reaches a new level of complexity when startups prepare to go public. A heightened scrutiny is witnessed on committee functions, fraud prevention and stakeholder management. Governance policies are rigorously reviewed so that it aligns with regulatory requirements like the Companies Act 2013 and SEBI regulations. This stage is crucial as it emphasizes transparency, accountability and effective management of stakeholder relationships.
Certain core principles of governance remain critical throughout the journey and startups must prioritize certain aspects like statutory compliance, transparent fund utilization, strategic progress monitoring and effective human resources management. The startups should also embrace Corporate Social Responsibility (CSR) and Environmental, Social, and Governance (ESG) norms as well.
